No debate, it is always better to buy than rent

    If you are financially able to do so, it is always better to buy than rent, says Samuel Seeff, chairman of the Seeff Property Group.

    There is simply no debate when it comes to owning the roof over your head. It creates security, stability and personal wealth. You can finance the purchase of your home and pay it off over twenty-odd years while it continues to accumulate in value.

    You will often find economists and analysts looking for reasons why it is cheaper to rent motivated by economic models which illustrate that you can get better returns by renting versus buying. While this will no doubt hold merit for investment buyers, Seeff says it is of no value to ordinary people looking to secure their own home which make up over ninety percent of buyers in the market.

    When you are renting, you are enriching a landlord. When you pay off a mortgage loan, you are building your own wealth. Property wealth is the cornerstone of any successful economy. Given the current near five-decade low interest rate, there is no case which can be made that it is better to rent if you are able to purchase your own home, he says.

    The only time it makes sense to rent is if you are not financially able or if you need mobility in terms of being able to move quickly or are between homes and want to rent while you decide where to put down roots, he says.

    There has not been a better time for first-time buyers to get onto the property ladder in my over three-decade long career in real estate, says Seeff. Aside from the historically low interest rate, the latest bank data shows that mortgage extension continues to grow at a faster pace and loan-to-price (LTP) ratios remain high.

    Economic models used to illustrate that it is cheaper to rent assume that tenants are investing the difference between their monthly rent and what a bond repayment would be elsewhere. This is seldom the case.

    Seeff says further that property does not get cheaper and so delaying the decision to purchase property means you are going to have to purchase at a higher price and possibly higher transaction costs as well. Prices are stable and, in many areas, we are still seeing a level of price appreciation despite the gloom and doom predicted by analysts.

    Historically South African house prices have always held up well, says Seeff. Even in the most challenging years around 1994, prices held firmly and during the boom years of 2000 to 2006 rewarded property owners with growth of around 20% on average.

    While the market has struggled to regain this phenomenal performance, we did see significant growth in certain high-demand areas such as the Western Cape during the 2012 to 2017 period with property prices in some areas practically doubling over a five-year period.

    Although you would have a lower net spend if you rent for ten to fifteen years, you will have nothing to show for it at the end. By purchasing your own home, you will have made quite a dent in reducing the capital amount borrowed in that same time and by the time your mortgage is paid off, your property could be worth twice as much as you paid for it.

    Author: Gina Meintjes
    Related Articles
    Home is our story logo